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Weekly Economic Commentary

Monday November 23, 2015

Financial markets spent the last week poring over the central bank minutes from Europe, the United States and Australia. The consensus seems to be a gradually improving global economy, with the US Federal Reserve widely expected to raise rates in December – the probability of a US rate hike is currently 70%. Conversely, local markets are unwinding expectations of further RBA rate cuts, with the futures market only pricing in a terminal (low) cash rate of 1.85% by June 2016 – not even one full 25 basis point rate cut.

Ordinarily, lower commodity prices (oil and iron ore at near record lows), as well as higher interest rates in the US would see a fall in the Aussie dollar, as investors chase the rising yields on offer in the US. However, we are currently seeing solid support for the Aussie around the USD0.70 level.

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